Obama Should Just Spend December in Hawaii

From “The Logic of a January Fiscal Cliff Deal,” Jonathan Chait, New York Magazine:

The GOP’s options for dealing with the expiration of the top-end tax cuts are as follows:

  1. Cut a deal now (or at least before January) with Obama to set tax rates at a mutually agreeable level.
  2. Vote to lock in the Bush tax cuts on income under $250,000, then strike a deal with Obama next year.
  3. Do nothing, wait for all the tax cuts to expire, then wind up voting to extend them on income under $250,000 after the party takes a hit from public opinion.

From the standpoint of getting the best deal, and from the standpoint of broader public opinion, option No. 1 is the best and No. 3 is the worst. But from the standpoint of satisfying the internal demands of conservatives who primarily want their leaders not to “sell them out,” the order is reversed. Option No. 1 means “voting to raise taxes.” Option No. 2 is sort of voting to raise taxes, though Republicans may use some trick like voting “present” to avoid actually casting a vote. And option No. 3 lets the higher taxes happen without any vote at all. Republicans can vote for a tax cut.

That’s why a deal in early January probably makes the most sense for all sides. The effects of the fiscal cliff are cumulative, and the economic damage from waiting shortly into the New Year will probably be minimal to nonexistent. But the political dynamic resets in a way that makes a deal much easier to strike. Obama would already have most of the revenue he’s asking for. He could get all the additional revenue he needs without raising rates — he could even let rates drop a point or two to make Republicans feel better about things. Then the deal gets very easy for both sides.

6 comments on “Obama Should Just Spend December in Hawaii

  1. FLPatriot says:

    What good will it do to raise taxes on any Americans? Even the “evil 2%” that make over $250k/year, what do you think will be accomplished by raising their earned income tax rate by 4.9%?

    • I said 2%, not evil 2%. I don’t think my husband or I are evil because we’ve worked hard and been successful. What will be accomplished will be to pay for stuff, like our military, like our infrastructure, like helping my fellow citizens who need it. My taxes will go up to what they were under Clinton (whom I didn’t vote for either time, by the way), and I lived well then, and I will live well now. Compared to the blessing of being an American, a tax increase is nothing.

      • FLPatriot says:

        Sorry, did not mean to imply you called them the “evil 2%”, I just use that term to demonstrate the general opinion of the progressives. It’s the left that think your evil and greedy for being successful and enjoying the fruits of your labor.

        As for what that increased taxes on the top tax rate, are not those things being paid for now? There is no plan to apply the increased revenue to those things either.

        The fact is that while we are running a deficit the increase revenue will be flushed down a “debt interest payment” toilet. Wouldn’t it be smarter to stop the deficit spending first so that any increased revenue would actually go to increased spending to help those that need it or to fund those programs that need increased budgets?

        I understand that if we could increase revenue to cover the deficit you could consider that, but there is not enough money in America to do that even if you taxed everyone at 100%, never mind that fact that no one would work for free. Any money taken in taxes right now would accomplish nothing except take money out of the economy, not a good idea.

        Good topic and thank you again for your time.

      • I think it is hard to stop the deficit spending without cutting things that we need. I think right now we’re not taxed enough, not bringing in enough revenue, to pay for what our government should be doing, from defense to unemployment benefits. If you raise my taxes, I won’t spend less on consumer stuff, I won’t fire my housekeeper or gardener or stop going to restaurants. But if you raise taxes on the middle class, that will affect consumer spending, which we can’t afford. That’s why it’s important to tax the people (like me) who will keep spending.

        The planned marginal rate increases on the top 2% are hardly confiscatory. This country boomed in the 50’s and 60’s when marginal rates were much higher. My mother was in the yacht sales business, and she sold a lot of boats back then!

      • FLPatriot says:

        During the 50s and 60s we where a production based economy and the world was buying our goods. We are now a consumer based economy and that in itself is unsustainable.

        “I think it is hard to stop the deficit spending without cutting things that we need.” are you saying that every government program is needed and is running efficiently? I would bet that there are enough programs that can be cut, and enough waste to be eliminated that we can get rid of our deficit this year. Then when we raise revenues that money would go to a more efficient government that would make better use of it.

        Good to hear that your in such a good financial situation, but I know people who make more than $250k/year, in fact a lot more, and they have told me that they will have to adjust their spending if the tax increase goes through. I guess it will hit those that make well over the rich level harder than those closer to it.

      • There is always waste, but it seems as if the cuts are always to the poor and near poor, to those who don’t have lobbyists. I am a super-hawk, ready to bomb Iran today, but I’m sure cuts can be made to defense. We are never going to get every government program run efficiently. Only Heaven is run efficiently!
        I wasn’t saying we should return to the marginal rates of the 50’s and 60’s, just that we can go to the Clinton rates.
        I am much closer to those making $250K than I am to, say, Mitt.

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